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T-Advisor, your suite for self-directed investment management, has a module to help investors find new ideas to improve their returns. These “Investment ideas” has a list of market opportunities from exchanges around the world that our algorithm selects and update every Monday. That is why we post every week a selection of them, but what criteria do we use to choose you some of them?

First of all, we look into all the markets to find what stocks have been selected. The screen shows initially just some figures from the securities of each market. We take into account the trend. We opt for the ones with bullish trend and with less than 1% slope. Why? Because we prefer stable and progressive increases instead of sudden ones which makes the security more volatile.

The selection keeps on checking several figures in the T-Report:

The liquidity grade: it has to be higher than 5

The score: it has to be also higher than 5 or 6

The performance: it has to be positive in the year and show also a positive figure in the last year, to confirm that the stock did not suffer a strong variability.

Finally, we also look the 1-year chart. We avoid charts with strong variations or sudden jumps upwards. We prefer steady positive trends to avoid high risks. You can find the difference clearly in these charts:

We consider that investments should be for a long-term. Trading is also a possibility for investors. We are not critical with it, but we prefer a more stable model. That is why our weekly proposals tend to be bets for that idea. Of course, markets change daily, but it does not mean that investors have to react immediately to every event. Portfolios should tend to be stable and include changes when your goals and risk profile change, because you evolve also as investors, or when your securities do not play a positive role anymore. That is why it is relevant the long-term view. That avoids sudden changes… and mistakes guided for the moment.

You are a new investor or with low experience in investments. You have available a good database to check possible asset to invest in, but which would be the right one? How can you select the most interesting assets for your goals? We recommend you to look into a database with high-quality reports about the assets. There you will find lots of information. Check the following figures to take a decision:

Performance: look at the historical performance. How good were the returns in the last months? And in the last years? It is true that past performances do not guarantee future results, but it show a trend about the long-term stability. It is not the same to get a share with positive and negative returns in different years than a one with regular positive returns.

Volatility: this is quite important. Volatility measures a deviation from a middle point. For instance, if the price goes up 4% one day and goes down 3% the following, the security is quite volatile. On the other hand, if the price goes up 0.2% three days and goes down 0.1% one day, it is less volatile. Take it into account depending your risk profile: if you are risk averse, you will not feel comfortable with a share that has high variations every day.

Trend: it is the development of a security in a timeframe. You have to consider the recent trend to decide to invest or not. A trend has a slope. If the slope is strong, it means that the trend has accelerated. For instance, if the slope is strong upwards, it can mean a bubble or that there is speculation behind the movement. On the other hand, if is very negative, it can mean a crisis in the company.

A historical chart: an image is worth more than a thousand words. It is easy to detect the items mentioned above in a chart. The best one is an active chart where you can choose different timeframes.

Value at Risk (VaR): this is an advanced item, but very useful. What does it measures? The probability of losses in a timeframe. You will read “VaR one week” or “VaR one year”. It indicates that you can lose at maximum the written figure with a 95% probability. In other words: if you invest in that asset, you can earn, you can lose less than the indicated figure in the VaR, you can lose at maximum that figure with 95% probability and you can lose more than that maximum with 5% probability. These are the scenarios that you have to analyze. The highest VaR it is, the highest risk you accept.

This is the beginning. There are some more that we will comment in future posts. The T-Report in T-Advisor offers all these data. Check it in our platform.

The schools in finances, if we may speak about them, are two: fundamentalists and chartists or technicians. Both are quite different when they analyze and prospect market trends. Fundamentalists look into the conditions that produce a given price in a moment (for instance, interest rates for currencies or balance sheets in companies). On the contrary, technicians just consider the price without any economic or accounting figure and research into the trends of the pricing line in a chart.

Let’s look this example extracted from the T-Advisor app. If we select a listed item (in this case, Bank of America), we can choose different indicators from the software.

An example resulted from the selection of some indicators show us the following chart:

In this chart we selected the pricing line since 2001 and the trending lines SMA (Simple Moving Average) for 20, 70 and 200 days. These lines let the investor or the advisor have the perception of how the price of this company is moving in the market.

What are the main advantages of technical analysis? Actually, this concept focuses just on price. So, as particular investors, we do not need to know deeply about economics. Secondly, charts give us easily and quickly the trend (upwards, downwards, sideways). Thirdly, we discover patterns, as technicians think that market actions repeat. Of course, they are not necessary easy to discover, but they exist. Finally, charts provide the investor a wealth of information just with an image and the right software.

Technical analysis has jumped with the development of computing and software tools based on this concept are a great help to success in the finance markets. Last, but not least, technical analysis is applicable to all kind of tradable products: stocks, bonds, currencies or commodities.

Are you new in finances? Do you want to learn more about technical analysis? This blog will publish regularly posts about the main concepts and vocabulary linked to it.